The market for heating oil, also known as No. 2 fuel oil, grew rapidly after 1945
as homeowners switched from coal to oil. For decades prices were somewhat
stable, reflecting the worldwide stability of crude oil prices.

In the 1970's, the heating oil market changed. As the government of foreign oil
producers nationalized their crude oil reserves, and following the Arab oil
embargo of 1973, price stability gave way to volatility throughout the heating oil
industry.

When price constraints were lifted on heating oil in the mid 1970's, the New
York Mercantile Exchange (NYMEX) began developing a heating oil futures
contract. In 1978 the world was introduced to the first successful energy futures
contract.

Heating oil comes to us by barge from foreign countries like Venezuela, Russia,
etc., or from the US in our backyard such as the Gulf. Crude from barges is
taken to an oil refinery. At this point for heating oil purposes, crude oil is refined
to produce No. 2, No. 4, and No. 6 heating oil. The oil is taken by barge, railcar,
or tank truck to a wholesale distributor to what's known in the heating oil
industry as the rack. The rack is a facility that usually holds millions of gallons
of heating oil; the rack is a wholesale supplier to the oil companies. Retail
heating oil companies pick up the oil by tank truck and distribute it throughout
their local heating oil market.

Heating oil is used by commercial, industrial, and residential customers for
domestic heat and hot water.

Heating oil accounts for almost 25% of the yield of a barrel of crude, it's the
second largest "cut" of the barrel after gasoline.